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Behind the Ever-Changing Internet Radio Landscape and Niche Success of AccuRadio

AccuRadio had played around with themes for years. "The next generation of radio." "Internet radio you control." "Radio that accurately reflects your tastes." "Crafted by music lovers -- not by a computer." "Over a thousand channels of variety -- with unlimited skips!"

In August of 2015 the company settled on a tagline that fit its new focus: "Better radio for your workday." It worked. AccuRadio's monthly sessions and average active sessions, as measured by Triton Digital, were among the biggest gainers in 2015.

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"I wanted to pick a relatively uncontested segment," says Kurt Hanson, AccuRadio's CEO and founder. Targeting daytime, working listeners is a throwback to the early days of webcasting, before smartphone apps took Internet radio mobile and Sonos, Roku and Apple TV piped digital music into living rooms.

In December, AccuRadio ranked twelfth on Triton Digital's ranking of U.S. digital audio networks and services, up from fourteenth a year earlier. (Excluding Spotify, which Triton did not track in 2014, AccuRadio would have been eleventh.) The number of people listening at the same time rose 35 percent to 14,000 from 10,400 a year earlier. Total sessions increased 21 percent to 2.5 million from 2.1 million.

Unlike its competitors, who frequently associate themselves with young and developing artists, AccuRadio targets the 35-to-64 demographic. Pandora tells advertisers that millennials (generally considered those between the ages of 18 and 34) spend more time with the service than average listener. Spotify skews younger both in penetration and self-identification. Half of 8tracks' listeners are aged 18 to 24. Amazon, though, might be an exception; its Prime Music streaming service is a broad yet middle-of-the-road offering with appeal for both millennials and their parents. "Classic Rock Dinner Party" and "Classical Dreamtime" are among its most popular playlists.

To be sure, AccuRadio ranks well behind the streaming leaders. A snapshot of December listening across the services illustrates the dominant players: Pandora had 2.5 million average active sessions and 1.26 billion total sessions; Spotify ranked second with 1.1 million average sessions and 852 million total sessions; YouTube (admittedly not a webcaster) and Apple Music would certainly rank high if they were tracked by Triton. But AccuRadio has grown, and it keeps people listening. The service's average session time in December, 1.73 hours, is more than double those of Pandora (0.63 hours) and Spotify (0.41 hours) and second only to punk and alternative station idobi Radio.

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"We've focused on genres and channels good for the workplace," says Hanson. "The idea is you can show up at your desk and within one or two clicks your radio will sound great all day. You don't have to build a channel. Pick a genre [and] you'll see a choice of options. Hopefully [...] it will sound great for eight hours." The company claims its listeners average one to two skips per day.

Stations skew heavily toward adult formats like smooth jazz and classic rock. Laid-back stations such as "The Spa Channel," "Classical Relaxation," "Textures Breeze" and "Beautiful Music" (a collection of mostly instrumental favorites) are reminiscent of muzak, sometimes (derogatorily) referred to as "elevator music." It has a page called "Workplace Moods Channels" with collections crafted for the worker that needs to avoid stress and remain concentrated on their job.

The addition of John Gehron as Chief Operating Officer in 2010 brought serious broadcast radio chops to the company and spurred AccuRadio to add more programmers and more channels. Gehron is credited with creating the first FM oldies station on the air in 1970, and helped shape the smooth jazz format in the early '90s before becoming an executive with American Radio and Infinity Broadcasting, Clear Channel and Oprah Winfrey's Harpo Radio. AccuRadio now has eight full-time and eight part-time employees, plus "a dozen or so" outside programmers that cover individual genres.

The market has changed since AccuRadio launched; Pandora became the market leader in webcasting and is now a publicly traded company with a market capitalization of $2.5 billion; on-demand services Spotify and SoundCloud have large followings in the United States; iHeartRadio has made a major push into webcasting; NPR has transitioned from jazz and classical stalwart to popular tastemaker.

The days of endlessly searching for music are over. Five years ago, curatorial efforts were mostly limited to playlists created by editors at early-on-the-scene subscription service Rhapsody. Since then, streaming services have have collectively had a "come to Jesus" moment about the value of lean-back listening. Spotify hired John Marks away from SiriusXM Music to head its global country programming and picked up George Ergatoudis, head of music at BBC Radio 1 and 1Xtra, to lead its content programming in the United Kingdom. Apple's Beats 1, a one-to-many radio station, poached Zane Lowe and a handful of producers and staffers from the BBC, while Apple Music stuck with and expanded on the editor-created genre playlists favored by its predecessor, Beats Music.

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"Kurt saw the Internet early and saw streaming probably earlier then anybody as viable business model," says Fred Jacobs, a radio consultant who knows Hanson from their days in radio research in the '70s. "Other streaming brands are flailing and trying to find their way."

Kurt Hansen
Kurt HansonAJ Kane

Marketing and branding is always crucial in music streaming. It's all about use cases. Does a service want to attract hardcore music consumers? Tell them they can choose from all the world's music, or something close to. Does the service want to target people who stream outside the home? Make it a mobile-first product with playlists for exercising and driving. Is it for audiophiles? Provide them high-definition audio.

For all the success, this is a difficult business with an ever-growing graveyard. AOL turned to Slacker to power its radio station in 2013. Yahoo let both CBS Radio, in 2009, and iHeartMedia, in 2012, power its radio station before quietly shutting it down two years ago. Apple shuttered its advertising-free radio service, iTunes Radio, last month. Samsung's Milk Music is rumored to be shutting down, although the company denies the claims and has stated it "remains committed" to the platform. The casualty list grew after this year's increase in the free streaming royalty rate, to 0.17 cents per stream from 0.14 cents. Longtime webcaster Live365 shut down last month after operating for over 16 years. Three-year-old Smooth Jazz Chicago also chose to shut down.

Some early webcasters are still around, and staying underground and subsisting on listener support has been a feasible model. Both and Radio Paradise have successfully employed an ad-free, listener-supported business model since 2000. Pandora, a second generation service but a trailblazer nonetheless, just celebrated its 10th birthday. It has racked up $367 million in losses while growing to 9.5 percent of all U.S. radio listening.

AccuRadio has survived by staying lean. Recently it has put more resources into its ad sales. Last year he hired Mary Beth Agase, a 20-year radio veteran of radio sales and management, to lead its sales efforts. Hanson says the company's new rep firm, Audio HQ, is getting AccuRadio national network radio buys with CPMs about 50 percent higher than the webcasting average. "We're getting into the $5 to $6 CPM range. This is still significantly lower than Pandora is getting in the local marketplace, but pretty good for national buys."

A $2.5 million investment in September 2014 by Los Angeles-based NantWorks led to three new full-time employees, several new outside music consultants and greater SEM expenditures such as pay-per-click advertising. It also provided the resources to add support for Roku and Sonos and allowed for a launch in Canada.

In spite of the growth and expansion, its focus remains on daytime workers. "Reaching people while they're at work is a very tough job for advertisers," says Hanson.